Working Paper: NBER ID: w18459
Authors: Marc-Andreas Muendler; James E. Rauch
Abstract: Many founding teams of new firms form at a common employer. We model team formation and the entry of employee spinoffs by extending the Jovanovic (1979) theory of job matching and employer learning. In our social-capital model employees learn about their colleagues' characteristics at a faster rate than the employer and recruit suitable colleagues to join the spinoff firm. For spinoff firms, our model predicts that the separation hazard is lower among founding team members than among workers hired from outside at founding, and that this difference shrinks with worker tenure at the firm. For parent firms, our model predicts that a worker's departure hazard to join a spinoff initially increases with worker tenure at the parent, whereas the separation hazard for conventional quits and layoffs decreases with worker tenure as in Jovanovic (1979). All these predictions are clearly supported in Brazilian data for the period 1995-2001. Calibration of our dynamic model indicates that employee spinoffs raise the share of workers in Brazil's private sector known to be of high match quality by 3.2 percent.
Keywords: social capital; employee spinoffs; team formation; Brazil
JEL Codes: D83; J63; L26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| social capital (Z13) | retention rates among team members versus non-team members (M51) |
| founding team members (L26) | hazard rate of separation from the spinoff firm (C41) |
| worker tenure (J63) | retention advantage (D25) |
| employee tenure (J63) | probability of an employee departing for a spinoff (J63) |
| team members (M54) | likelihood to remain with the spinoff (J63) |